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Why did Zillow pause its home-buying program?


Zillow is seared into our brains as the go-to website for finding home prices (and snooping on the value of our friends’ real estate portfolios).

In 2018, the $22B technology firm launched a completely new business line: Zillow Offers, a home buying and selling platform (AKA iBuying).

It saw strong growth for years, accounting for more than half of its $3.3B of revenue in 2020.

Zillow is now pausing the home-buying program

Why? Per The Wall Street Journal, the company is being hit on both the demand and supply side:

  • Home sales are slowing, which hampers Zillow’s ability to collect flipping fees (ranging from 9.5%-22% of home sale price)
  • A shortage of construction workers prevents Zillow from renovating the homes it purchases

One analyst tells WSJ that Zillow may have over-purchased homes.

Zillow Offers is very cash intensive…

… because the company has to put the homes on its balance sheet. Even with the pause, Zillow has 3k+ homes (valued at ~$1.2B) to unload.

The change comes a few weeks after Zillow came under fire over a viral TikTok video accusing it of buying up blocks of homes and manipulating home prices.

To add insult to injury, its main competitor -- Opendoor -- says its iBuying business is trucking along with 8.2k new home purchases expected in Q3 2021.

As long as nothing happens to the “Zillow Gone Wild” Instagram account, we’re cool.

Real Estate, Technology, Zillow, Zillow Offers, iBuying, House, Home, Buying, Selling


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